Featured Research

New Working Paper (with S. Kleimeier and Shusen Qi):Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage?In this paper we examine the impact of deposit insurance (DI) schemes on bilateral cross-border deposits. Our results suggest that not only the existence of explicit DI, but also DI design features, which reflect its credibility have an impact on cross-border deposits, and that the relative differences between reporting and depositor countries also matter. More importantly, in times of crises, depositors rely more on DI in general, but DI acts primarily as a “Safe Haven” rather than enabling “Regulatory Arbitrage”. During the global financial crisis of 2008/09 the emergency actions of bank country governments, which supply and maintain these safe havens, have led to substantial relocations of cross-border deposits.

New Research Paper (with Stefanie Kleimeier and Sylvia Heuchemer):The Resurgence of Cultural Borders during the Financial Crisis: The Changing Geography of Eurozone Cross-Border DepositingThis paper has been published by the Journal of Financial Stability 24(2016) and can be dowloaded here (free access until June 23, 2016). The paper investigates the impact of cultural borders on the geography of international finance during stable and crises times. It shows that cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs. While it provides evidence that cultural borders lost influence during a “Europhoria” phase after the introduction of Euro notes in 2002, it also indicates that cultural borders resurge during the 2007/08 financial crisis and severely limit financial integration.

New Working Paper (with S. Kleimeier and S. Heuchemer):The Resurgence of Cultural Borders in International Finance during the Financial Crisis: Evidence from Eurozone Cross-Border DepositingAbstract: The paper provides new evidence on the “resurgence of cultural borders in international finance during the financial crisis”. We show that cultural differences across act as invisible borders that limit financial integration in European cross-border depositing. This limiting effect has become weaker during the first years after the Euro notes went into circulation, most likely indicating some “Europhoria”. However, the financial crisis, and in particular the Euro crisis, has led to a strong resurgence of the limiting role of cultural differences.

Our results suggest that integrating cultural variables into theoretical and empirical research can enhance our understanding of financial retrenchment during financial crises and the often-observed over-optimism during stable periods. With respect to political implications, the study suggests that policymakers should acknowledge that cultural barriers have the potential to limit the effectiveness of integration policies. Nevertheless, the paper also indicates that they have effective instruments at their disposal: building confidence in institutions to overcome cultural borders.